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The Real Winners of the 2018 World Series of Poker

Sunday, July 15th, 2018

Over the past two weeks 7,874 competitors (myself included) paid $10,000 to enter the main event of the World Series of Poker. Who would win the money? And how much of the winnings would they actually get to keep?

One important note: I do need to point out that many of the players in the tournament were “backed.” Poker tournaments have a high variance (luck factor). Thus, many tournament players sell portions of their action to investors to lower their risk. It is quite likely that most (if not all) of the winners were backed and will, in the end, only enjoy a portion of their winnings. I ignore backing in this analysis (because the full details are rarely publicized). Now, on to the winners.

Congratulations to John Cynn of Evanston, Illinois for winning the 2018 WSOP Main Event and a cool $8,800,000. After a mammoth 10-hour heads-up battle against Tony Miles (where the chip lead went back and forth), Mr. Cynn finally prevailed when his king-jack flopped trips and all Mr. Miles could muster was queen-high. Mr. Cynn will pay federal income tax, self-employment tax (all nine of the final players are professional gamblers), and Illinois income tax. Of his winnings he’ll lose an estimated $3,860,183 to tax (keeping $4,939,817), a tax burden of 43.87%. Mr. Cynn definitely benefits from tax reform; had he had the same winnings in 2017 he would have owed $4,094,676 so he saves $234,493. Another way of looking at this is his tax burden last year would have been 46.53%. Mr. Cynn has the second highest tax burden of the final nine.

The aforementioned Tony Miles finished in second place. A resident of Jacksonville, Florida, Mr. Miles benefits from Florida’s lack of a personal income tax. Mr. Miles, like all of the Americans at the final table, will owe federal income tax and self-employment tax; he’ll owe an estimated $1,939,341 (38.79%) of his winnings.

Finishing in third place and winning $3,750,000 was Michael Dyer of Houston. Mr. Dyer had the chip lead for the first part of the final table but ran into a full house of held by Mr. Miles. The Texan avoids state income tax but will still lose an estimated $1,449,275 to federal tax (38.65%). Mr. Dyer has the lowest tax burden of the six Americans at the final table (and the second-lowest tax burden overall).

Nicolas Manion of Muskegon, Michigan started the final nine with the chip lead but couldn’t make it through; he ended up in fourth place for $2,825,000. Mr. Manion is the only individual who will end up paying three taxes: federal, state, and city. Michigan has a flat income tax of 4.25% and Muskegon has a city income tax of 0.5%. Still, Mr. Manion is better off in 2018 than if he had won this in 2017; he’ll lose only an estimated $1,217,323 to tax (43.09%).

Joe Cada finished fifth for $2,150,000. If that name sounds familiar, it should: Mr. Cada won the Main Event in 2009. This time around Mr. Cada’s pocket tens lost a classic race against Mr. Miles’s ace-king. Thanks to tax reform, Mr. Cada loses only 40.59% of his winnings to tax ($872,635) compared to 42% back in 2009. Mr. Cada, a resident of Shelby Township, Michigan, owes federal and Michigan tax.

Aram Zobian of Cranston, Rhode Island, ended up in sixth place for $1,800,000. A professional poker player, Mr. Zobian will owe federal and Rhode Island tax. Rhode Island has marginal tax rates up to 5.99%, so it’s in the middle of the pack for states. Overall, Mr. Zobian will owe an estimated $721,821 in tax (40.10%).

Alex Lynskey of Melbourne, Australia finished in seventh place. While the US and Australia have a tax treaty, it does not cover gambling. Thus, of Mr. Lynskey’s $1,500,000 of winnings, he loses 30% off the top to the IRS ($450,000). Australia does not tax gambling winnings for amateur gamblers but it does tax gambling winnings of professional gamblers. The Australian tax system somewhat mirrors ours in that are marginal rates; however, Australia’s top rate is 45% compared to our 37%. The US-Australia Tax Treaty does specify that a foreign tax credit can be taken for taxes paid to the other country. Mr. Lynskey would have paid an estimated $666,296 to the Australian Taxation Office; given the US tax he’s paid that number is reduced to $216,296 (or $292,000 Australian).

In eighth place was Artem Metalidi of Kiev, Ukraine. Mr. Metalidi will pay the least tax of any of the final nine, both in dollars and by percentage. Ukraine has a flat tax rate of 18% plus a 1.5% military tax (a total of 19.5%). Mr. Metalidi will lose only an estimated $243,750 of his $1,250,000 to tax. None of that is going to the IRS: The tax treaty between the Ukraine and the United States exempts gambling winnings from taxation.

Antoine Labat, a professional poker player from Vincenna, France, finished in ninth place. He earned an even $1 million, but that’s before taxes. The United States and France have a tax treaty exempting gambling winnings, so he lost nothing to Uncle Sam. However, France is anything but a low-tax environment. While 2018 French tax rates have not been announced (they’re not announced until late in the year), based on 2017 rates Mr. Labat will lose $432,574 (€369,721) of his $1 million (€854,701) winnings to taxes.

Here’s a table summarizing the tax bite:

Amount won at Final Table	$28,075,000
Tax to IRS	$9,811,437
Tax to Illinois Department of Revenue	$435,600
Tax to France Tax Administration	$432,574
Tax To State Fiscal Service (Ukraine)	$243,750
Tax to Australia Tax Agency	$216,296
Tax to Michigan Department of Treasury	$211,438
Tax to Rhode Island Division of Taxation	$37,978
Tax to City of Muskegon Treasurer Department	$14,125
Total Tax	$10,953,198

That means 39.01% of the winnings of the final nine will go to taxes. That’s up from 2017 because last year four of the final nine faced no taxation (they were all residents of the United Kingdom which does not tax gambling winnings).

Here’s a second table with the winners sorted by their estimated take-home winnings:

Winner	Before-Tax Prize	After-Tax Prize
1. John Cynn	$8,800,000	$4,939,817
2. Tony Miles	$5,000,000	$3,060,659
3. Michael Dyer	$3,750,000	$2,300,725
4. Nicolas Manion	$2,825,000	$1,607,677
5. Joe Cada	$2,150,000	$1,277,365
6. Aram Zobian	$1,800,000	$1,078,179
8. Artem Metalidi	$1,250,000	$1,006,250
7. Alex Lynskey	$1,500,000	$833,704
9. Antoine Labat	$1,000,000	$567,426
Totals	$28,075,000	$16,871,802

Mr. Metalidi finished in eighth place but based on after-tax winnings he finished in seventh place. The Ukraine’s low flat-rate income tax gives him a benefit over the relatively high taxes in Australia.

But the true winner this year was the Internal Revenue Service. The IRS’s take of $9,811,437 exceeds the combined after-tax winnings of the first and second place winners ($8,000,476) and nearly exceeds the top three! Taxes may be what we pay for a civilized society, but we sure pay a lot of them. One truism this year (as usual) is that the house (the IRS) always wins.

Tags:WSOP
Posted in Gambling | 1 Comment »

The FBAR Is Not Due Tomorrow

Thursday, June 28th, 2018

Most tax-related deadlines are on the 15th of various months. Income tax returns for individuals are due on April 15th; the extended deadline is October 15th. But just to have fun with us there are some exceptions. One of these used to be the FBAR—the Report of Foreign Bank and Financial Accounts (Form 114).

The FBAR used to be due on June 30th, and that was a receipt deadline. Almost every other deadline in tax is a postmark deadline; for example, if you mail your tax return on April 15th and it takes a month to get to the IRS it’s still considered timely filed. That wasn’t the case for the FBAR. Luckily, Congress changed the law.

Beginning with 2016 FBARs (those filed last year) the deadline was changed to be concurrent with the tax deadline (April 15th). There’s an automatic six-month extension until October 15th. A few years ago the FBAR changed and now must be electronically filed. It now also does not have to be accepted by the deadline to be considered timely; it only has to be filed by the deadline.

Every year I get asked by a few clients, “Russ, why haven’t you reminded me about the FBAR deadline at month-end?” I’m happy to tell them that’s simply no longer the case.

Tags:FBAR
Posted in FINCEN, Gambling, International | Comments Closed

Gambling with an Edge Podcast

Friday, June 22nd, 2018

I was the guest on this week’s Gambling with an Edge podcast. You can download the podcast here or on iTunes. The main point of discussion was the new tax law, but we covered some other topics such as bad tax states for gamblers, the Cincinnati Reds’ bobblehead case, and yesterday’s ruling in South Dakota v. Wayfair.

Tags:Gambling.With.An.Edge
Posted in Gambling, Taxable Talk | Comments Closed

WSOP and Taxes: 2018 Update

Wednesday, May 30th, 2018

The 2018 World Series of Poker (WSOP) begins today here in Las Vegas. There are also several other tournament series that have either begun or will soon begin at the Venetian, Wynn/Encore, Aria, Planet Hollywood, Binion’s, Golden Nugget, and Orleans hotels. Very little has changed from 2017, but I am updating the post I did last year with some new information.

The WSOP has made one change that could impact some Americans: If you use a passport for identification, you must bring a second piece of identification (such as a state ID card). From the WSOP FAQs:

What Photo ID’s are acceptable?
The following forms of ID are acceptable:
US Passport [and Passport Card] (A second form, an unexpired governmental ID verifying physical address such as a valid Driver’s License will also be required with this first form of ID).

(A driver’s license or state ID by itself is sufficient.)

Good luck to those participating in this year’s WSOP! And now on to the meat of the post:

The tax environment has changed, so I’ve decided to do a thorough update of the tax situation for those attending the WSOP (and other summer poker tournament series here in Las Vegas). I’ll cover the basics of the tax situation, backing, foreign (non-US) backing, and non-American winners and what they will face with taxes. This post will be somewhat long, so I’m going to break this into sections that you can click on to open. The focus is on tournaments where tax paperwork is issued.

The Tax Basics

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Backing by Americans of Americans

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Suppose Russ plays in a WSOP event and is backed by Scott. Scott has provided half of Russ’s buyin and Russ has agreed to give Scott 50% of his net winnings. Russ is lucky enough to win $10,000 net, so he will receive tax paperwork from the Rio Hotel and Casino (where the WSOP is played). What should Russ do?

First, before the tournament Russ should collect social security numbers from his backers. The IRS has a form for this: Form W-9. The backer completes the form (including signing it) and provides it to the individual he’s backing (not the IRS).

The IRS also has a form, Form 5754, designed specifically for the situation where you have backers. You include the names, addresses, and tax identification numbers (social security numbers or ITINs) of the backers along with their percentage winnings or the exact winnings. The casino is supposed to issue multiple W-2Gs. Unfortunately, the WSOP will not issue multiple W-2Gs even though the instructions to Form 5754 specify that the casino is supposed to follow the form [Note 1]. However, some other casino have been following Form 5754 (the Wynn/Encore and Venetian are two such casinos), so it’s still a good idea to have the form completed if you’re playing outside of the Rio.

So what should Russ do when he cashes at the WSOP? Russ becomes the casino for paperwork issuing; he must issue his backer(s) paperwork to show their winnings. It’s a fundamental principal of US tax law that everyone pays tax on their income, not anyone else’s. Russ should issue Form 1099-MISC(s) to his backers showing their shares of his winnings.

A couple of comments about Form 1099-MISC. First, you issue one 1099-MISC to an individual per type of income per year. Thus, generally you will wait until the end of the year to send out your 1099s. Second, it’s far easier to obtain backers’ tax identification numbers before you pay them. You should make receiving appropriate tax paperwork (W-9 for Americans, W-8BEN for non-Americans) a requirement for your backers to receive their shares of your income. Third, note that Form 1099-MISC cannot be downloaded off the Internet. If you file paper Form 1099-MISCs with the IRS, you must order the forms from the IRS. If you are going to paper-file your Form 1099s, you must also order Form 1096 (this is the cover page that you use to send 1099s to the IRS).

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Backing: Non-Americans

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What happens if an American is backed by an individual from a Tax Treaty country (such as Russia)? Under the US-Russia Tax Treaty, the gambling income of a Russian is not subject to US taxation. Second, what happens if an American is backed by an individual from a non-Tax Treaty country (such as Australia) or from Canada (the US-Canada Tax Treaty mandates withholding)? Finally, what happens if someone from a non-Tax Treaty country or Canada is backed by an American?

For all three scenarios, let’s assume I’m entering the main event of the WSOP (the buy-in is $10,000); my backer is paying $5,000 and is receiving 50% of my winnings. I place in the event and win $20,000, so my backer is owed $10,000 (all numbers before withholding).

Scenario #1: US Player Backed by an Individual from a Tax Treaty Country.

Let’s assume I’m playing and am backed by Ivan from Russia. I receive a W-2G for $10,000 (my net winnings). It would seem all I have to do is just pay Ivan his $10,000 share of my gross profit, right?

Wrong.

Even though Ivan is from a Tax Treaty country, paperwork is required or tax must be withheld. Ivan needs to provide you either a Form W-8BEN or a Form W-8ECI. The Form W-8BEN is used to note the benefits of a Tax Treaty. Ivan would complete the form, including his ITIN and note the Article of the Tax Treaty that specifies that there would be no withholding. As long as you receive the completed Form W-8BEN you can then pay Ivan his share. If you pay by cash or casino chips, make sure you get a signed receipt from Ivan acknowledging his receipt of the money.

What if Ivan doesn’t have an ITIN? Then you must withhold at 30% even though he’s exempt from withholding. You would need to complete Form 1042-S and depending on the amount withheld very quickly remit that money using EFTPS to the IRS. (EFTPS is now the only method available for making withholding deposits to the IRS.) Ivan can get the money back by filing a Form 1040NR following year-end.

If Ivan has a business operating in the US, he would provide Form W-8ECI with either his Employer Identification Number (EIN) or his ITIN. This will allow you not to withhold to Ivan.

Note: Even if no withholding is required a Form 1042-S must be submitted to the IRS. We can see that even the easy scenario isn’t necessarily that easy.

Scenario #2: US Player Backed by an Individual from a Non-Tax Treaty Country

This case is relatively straightforward. Let’s say your backer is Jon from Canada or Australia. (Although Canadians can get some to all of their money back by filing Form 1040NR after year-end, you are required to withhold on their income per the US-Canada Tax Treaty.) You must withhold 30% of their winnings. You would pay him all of his $5,000 investment and 70% of his $5,000 winnings ($3,500) for a total of $8,500. You would complete Form 1042-S with his information and note that $1,500 of his $5,000 of income has been withheld. Depending on the amount withheld, there can be very quick deadlines for remitting that withholding to the IRS; that withheld funds must be remitted using EFTPS.

Scenario #3: Non Tax-Treaty Player Backed by an Individual from the US

This is the ugly scenario. Suppose Jon is backed by Russ from the US. Russ isn’t subject to any withholding on his money (he’s a US citizen, after all) and is more than willing to provide a completed Form W-9. Unfortunately, because Caesars will not issue multiple W-2Gs/Form 1042-S’s, all of the $10,000 Jon wins will be subject to withholding. So Jon will receive $17,000 (his $10,000 entry plus $7,000 of his $10,000 in winnings).

Jon is left with two bad options. He could pay Russ $3,500 (half of the amount he has won). Russ will rightly be annoyed as he should receive $5,000. Jon has no way of telling the IRS that $1,500 of his tax withheld is for Russ [See Note 2 below].

Alternatively, Jon can pay Russ $5,000 and now he only has $2,000 of his winnings (rather than the $3,500 he should have). That method probably doesn’t appeal to Jon at all.

Unfortunately, neither option is palatable to both individuals and these are the only two options available. There is a solution: Americans should not back individuals from non-Tax Treaty countries. (The better solution, Caesars issuing multiple W-2Gs/1042-S’s, will have to wait until the IRS goes after Caesars on their policy.)

There are some other things that need to be pointed out. The participant will likely have to issue 1099-MISC’s or 1042-S’s to individuals. You probably don’t want everyone to know your social security number. If you’re a professional gambler, there’s a solution: Apply for an EIN. You can do this at no charge online at the IRS website. You must have an EIN if you are going to have to withhold funds.

Next, if there’s a possibility you are going to be a withholding agent, you must have both an EIN and an EFTPS account. After you get the EIN, immediately enroll in EFTPS. Your passwords are mailed to you; this takes about 10-14 days from the date you enroll, so get this going now if you are going to be playing in the 2018 WSOP and this applies to you.

Third, you can give Caesars a piece of your mind (nicely, though) and let them know about the ridiculousness of their policy. That’s especially true if you’re from Australia and you would like to be backed by an American (or someone from a country with a favorable Tax Treaty with the US).

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Non-Americans and ITINs

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When I wrote this article last year, it was very uncertain whether or not casinos would be allowed to issue ITINs. The IRS, in March 2017, sent letters to casinos telling them to cease and desist issuing ITINs. Luckily, the IRS relented and those casinos that are authorized “Acceptance Agents” can still issue ITINs. The Rio Hotel and Casino (which hosts the WSOP) and most of the major Las Vegas casinos can issue ITINs. If you are from a country with a Tax Treaty with the US that covers gambling and are playing in a poker tournament at a different casino, you can (and likely should) check with the casino to see whether or not they issue ITINs.

Let’s say you’re from the United Kingdom and are backing Russ. He wins $20,000 at the WSOP ($10,000 of it goes to you) and you don’t want him to withhold $3,000. If you wait to do something until Russ wins the money, he’s going to have to withhold. In that case, you will have to apply for an ITIN and file Form 1040-NR with the IRS the following year. It takes approximately two months to receive an ITIN after applying. Form 1040-NR is released around February 1st (of the following year); it takes about six months to receive a refund after filing Form 1040-NR. The refund is issued as a check mailed to the address on file.

There are three methods available to apply for an ITIN. No matter which method you use you will need to complete Form W-7 and have the required backup documents (generally, your original passport).

You can apply by mailing your Form W-7 with backup documents to the IRS. This is generally done with the filing of a tax return. You can provide a prepaid courier envelope to receive back your passport. Your ITIN will be issued in about two months.

You can also make an appointment at an IRS office. The IRS will review your backup documents for your W-7 and make “certified copies” and forward the W-7 to Austin, Texas (where ITINs are issued). If you have a Tax Treaty reason, you can obtain an ITIN. The last time I checked the wait time to get an appointment here in Las Vegas is six weeks.

I was also informed by a local IRS Acceptance Agent that the IRS has not cut them off (yet) from reviewing W-7 paperwork and forwarding paperwork and “certified copies” to Austin. This may be a good method for someone who is in Las Vegas to apply for an ITIN. Do realize that the ability of local IRS Acceptance Agents of reviewing W-7 paperwork could be cut off at any time. Also, if you use a local Acceptance Agent you will not obtain an ITIN immediately; your ITIN will still be mailed to you in two months.

Thus, my strong recommendation for such an individual backing an American is to get your ITIN now!

But what if you already have a valid ITIN and are from a Tax Treaty country? Then there are no issues. You will just let the casino know your ITIN number when you cash. (You may be asked to provide other documentation and/or be asked to complete a Form W-8BEN.)

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[Note 1]: I recently became aware of a lawsuit in the Midwest where Caesars’ policy is being challenged. The lawsuit is scheduled for trial in late January 2018.

[Note 2]: It is likely the IRS would reject a Form 1040NR filed by Jon noting his extra withholding. The IRS won’t understand the issue given that there is no tax treaty issue (say, Jon is from Australia) and say, “Take it up with Caesars.” It’s a classic Catch-22.

Tags:WSOP
Posted in Gambling | 4 Comments »

Online Gambling and Offshore Cryptocurrency Exchange Addresses for 2018

Wednesday, January 24th, 2018

This list has been superseded by the 2019 list.

With the United States v. Hom decision, we must again file an FBAR for foreign online gambling sites. An FBAR (Form 114) is required if your aggregate balance exceeds $10,000 at any time during the year. (The IRS and FINCEN now allege that foreign online poker accounts are “casino” accounts that must be reported as foreign financial accounts. The rule of thumb, when in doubt report, applies—especially given the extreme penalties.) You also should consider filing an FBAR if you have $10,000 or more in a non-US Cryptocurrency Exchange.

There’s a problem, though. Most of these entities don’t broadcast their addresses. Some individuals sent email inquiries to one of these gambling sites and received politely worded responses (or not so politely worded) that said that it’s none of your business.

Well, not fully completing the Form 114 can subject you to a substantial penalty. I’ve been compiling a list of the addresses of the online gambling sites. It’s presented below.

FINCEN does not want dba’s; however, they’re required for Form 8938. One would think that two different agencies of the Department of the Treasury would speak the same language…but one would be wrong.

You will see the entries do include the dba’s. Let’s say you’re reporting an account on PokerStars. On the FBAR, you would enter the address as follows:

Rational Entertainment Enterprises Limited
Douglas Bay Complex, King Edward Rd
Onchan, IM31DZ Isle of Man

Here’s how you would enter it for Form 8938:

Rational Entertainment Enterprises Limited dba PokerStars
Douglas Bay Complex, King Edward Rd
Onchan, IM3 1DZ Isle of Man

You will also see that on the FBAR spaces in a postal code are removed; they’re entered on Form 8938. You can’t make this stuff up….

Finally, I no longer have an address for Bodog. If anyone has a current mailing address, please leave it in the comments or email me with it.

Note: This list is presented for informational purposes only. It is believed accurate as of January 24, 2018. However, I do not take responsibility for your use of this list or for the accuracy of any of the addresses presented on the list.

The list is in the cut text below.

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The list is in alphabetical order by the common name (not the legal name) of the gambling site. An entry is:

Common Name
Legal Name
Address
City, State/Territory, Postal Code, Country

Note that not all entities have states/territories or postal codes.

IMPORTANT: When reporting on Form 114, the dba’s are not included. When reporting on Form 8938, the dba’s are included.

10Bet
Comfortlink N.V. dba 10bet.com
E-Commerce Park
Vredenberg, Curacao

12Bet
TGP Europe Limited dba 12bet.com
Armitage House, Ridgeway St
Douglas, IM1 1LE, Isle of Man

188Bet
Cube Limited dba 188bet
Ground Floor, St. George’s Court, Upper Church St
Douglas, IM1 1EE, Isle of Man

24h Poker
iGame Malta Ltd dba 24h Poker
6, The Firs, George Borg Olivier St
Sliema, SLM 1801, Malta

5dimes
5Dimes Casino and Sportsbook
Edificio Equus
San Jose, Costa Rica

888poker
Cassava Enterprises (Gibraltar) Limited dba 888 Poker
Suite 601-701, Europort Ave
Gibraltar, Gibraltar

AA Poker
Memoriki Limited dba AA Poker
18/F, Star Centre, 35 Hung To Rd, Kwun Tong, Kowloon
Hong Kong, Hong Kong

Aced Poker
PDC Global Collections Ltd dba Aced Poker
19/21 Circular Rd
Douglas, Isle of Man

America’s Cardroom
BMX Entertainment dba America’s Cardroom
71C Georgio A, Office 3, Germasogeia
Limassol, 4047, Cyprus

Asianconnect88
Asianconnect N.V. dba Asianconnect88
E-Zone Beheer van Engelen N.V., Van Engelenweg 21A
Willemstad, Curacao (Netherlands Antilles)

Best Poker
BestPoker.com Public Ltd.
10 Gregori Afxhentiou Ave, Libadhiotis Bldg No. 5, Ste 107
PO Box 42631
Larnaca, 6501, Cyprus

Bet365
Bet365
Hillside, Festival Way, Stoke-on-Trent
Staffordshire, ST1 5SH, United Kingdom

Betclic
Betclic Everest Group dba Betclic
5, rue François 1er
Paris, 75008, France

Betcoin.ag
Betcoin.ag
Gandi-63-65 Blvd Massena
Paris, 75013, France

BetCris
Townview Trading Ltd dba BetCris
64 Agiou Georgiou Makri, Anna Maria Lena Court, Office 201
Larnaca, 6037, Cyprus

BETDAQ
Ladbrokes International plc dba BETDAQ
57-63 Line Wall Rd
Gibraltar, Gibraltar

BETDSI
DSI dba BETDSI
Edificio La Colmena, Floor 7, 75m West Contraloria
San Jose, Costa Rica

Betfair
The Sporting Exchange Ltd dba Betfair
Waterfront, Hammersmith Enbakement, Chancellors Rd
London, W6 9HP, United Kingdom

Betfred
Petfre (Gibraltar) Limited
5/2 Waterfront Place
Gibraltar, Gibraltar

Betmost Poker
WHG (International) Limited dba Betmost Poker
6/1 Waterfront Place
Gibraltar, Gibraltar

Betonline
Betonline.ag
cs@betonline.ag
Panama City, Panama

Betsafe
Safepay Malta Limited dba Betsafe Poker
Level 4, Marina Business Centre, Abate Rigord St
Ta’Xbiex, XBX1127, Malta

Bettson
BML Group Ltd dba Bettson
Bettson Experience Center, Ta’Xbiex Seafront
Ta’Xbiex, XBX 1027, Malta

betusa.ag
Domain Holdings Limited dba betusa.ag
Jasmine Ct, Ste 17, Friar’s Hill Rd
St. Johns, Antigua

BetVictor
Victor Chandler International Ltd dba BetVictor
Leanse Place, 50 Town Range
Gibraltar, Gibraltar

Binance
Binance
support@binance.zendesk.com
Tokyo, Japan

BigBoy Poker
bigboypoker.online
support@bigboypoker.online
San Jose, Costa Rica

Bitfinex
BFXNA Inc dba Bitfinex
Ste 13/F, 1308 Bank of America Tower, 12 Harcourt Rd, Central
Hong Kong, Hong Kong

BitGrail
BitGrail S.r.l.
Via Roma 235, C.a.p. 50058
Signa, Florence, Italy

BitMex
HDR Global Trading Limited dba BitMex
Second Flr, Capital City, Independence Ave, PO Box 1008
Victoria, Mahe, Seychelles

Bitstamp
Bitstamp Ltd.
5 New Street Square
London, EC4A 3TW United Kingdom

Black Chip Poker
Black Chip Poker
3/4-8 Churchill St
Coolangatta, Queensland 4225, Australia

Bluetrade.com
Bleu Digital Enterprises Ltd
60/2, Melita St
Valletta, VLT1122, Malta

Blockchain
Blockchain.info
Rue de Merl, 74
Luxembourg, 2146, Luxembourg

Bodog
Bodog
service@bodog.eu
Manila, Philippines

Bookmaker.eu
Investments Manager, S.A. dba Bookmaker.eu
Edificio La Colmena
San Jose, Costa Rica

Bovada
Salmon River Technologies Ltd dba Bovada
PO Box 2190
Kahnawake, QC J0L 1B0 Canada

Bwin
ElectraWorks Limited dba BWIN
Ste 6, Atlantic Suites, Europort Ave
Gibraltar, Gibraltar

Boylesports
Boylesports Ltd
First Floor, Millennium House, Victoria Rd
Douglas, IM2 4RW Isle of Man

BTC-e
Always Efficient LLP dba BTC-e
5 Percy St, Fitzrovia
London, W1T 1DG United Kingdom

Cake Poker
Cake Entertainment N.V.
Dr. M.J. Hugenholtzweg Z/N UTS Gebouw
Willemstad, Netherlands Antilles (Curacao)

Carbon Poker
PDC Global Collections Ltd dba Carbon Poker
19/21 Circular Rd
Douglas, Isle of Man

CaribSports
Carib International Entertainment Ltd dba CaribSports
35 New Rd
Belize City, Belize

Cashpoint
Cashpoint (Malta) Ltd.
Level 1, Salvu Psaila St
Birkirkara, BKR9077, Malta

Celeb Poker
Precious Deal Investments Limited dba Celeb Poker
PO Box 146 Road Town
Tortola, British Virgin Islands

CEX
CEX.io Ltd
24th Flr, One Canada Square, Canary Wharf
London, E14 5AB, United Kingdom

Click and Buy
Click and Buy International Ltd
6-9 Cynthia St
London, N1 9JF United Kingdom

Cloudbet
C.B. Holdings dba Cloudbet
support@cloudbet.com
Willemstad, Curacao

Coinexchange.io
Coinexchange.io
support@coinexchange.io
Sydney, Australia

Coinmate
Confirmo Ltd. dba Coinmate
Warnford Court, 29 Throgmorton St
London, EC2N 2AT, United Kingdom

ComeOn! Poker
Co-Gaming Limited dba ComeOn! Poker
Block A, Ste 3, 177, Skyway Offices, Marina St
Pieta, PTA 9042, Malta

Coral Poker
Gala Interactive (Gibraltar) Ltd
2nd Floor, Regal House, Queensway
Gibraltar, Gibraltar

CryptoPay
CryptoPay
145/147 Hatfield Rd
St. Albans, AL1 4YJ, United Kingdom

Cryptopia
Cryptopia
107A Montreal St, Sydenham
Christchurch, 8023, New Zealand

CurrencyFair
CurrencyFair Ltd
First Floor, Westmoreland House
Westmoreland Park, Dublin, 6, Ireland

Dafabet
Emphasis Services Limited dba Dafabet
43/F Yuchengco Tower, RCBC Plaza, Ayala Ave Cor. Gil Puyat Ave
Makati City, 1200, Philippines

ecoPayz
PSI-Pay Ltd dba ecoPayz
Afon Bldg, Worthing Rd
Horsham, West Sussex, RH12 1TL, United Kingdom

Electrum [Bitcoin Wallet]
Electrum
63-65 Blvd Massena
Paris, 75013, France

Entropay
Ixaris Systems (Malta) Ltd. dba Entropay
The Penthouse – Ste 1, Capital Business Centre, Triq Taz-Zwegt
San Gwann, SGN 3000, Malta

Expekt Sportsbook
Mangas Gaming Malta Limited dba Expekt Sportsbook
Level 3, Taliaferro Business, Gaiety Ln
Sliema, Malta

Fabulous Poker
Investments Manager, S.A. dba Fabulouspoker.com
Sabana Sur
San Jose, 10000, Costa Rica

Fairlay
Fairlay LLC
ogngen@fairlay.com
San Jose, Costa Rica

Foxbit
Foxbit
Av. Eng. Luis Carlos Berrini, 105 – Sala 605 – Cidade Moncoes
Sao Paulo, Brazil

Full Flush Poker
Liberia Ventures Limited dba Full Flush Poker
Brittania House 8, Old Bakery St
Valletta, Malta

Gala Poker
Bingo Entertainment Ltd dba Gala Poker
PO Box 57039
Limmasol, 3311, Cyprus

Gate.io
Gate.io
support@mail.gate.io
George Town, Caymen Islands

Gatehub
GateHub Limited
Ste 48, 88-90 Hatton Garden
London, EC1N 8PN United Kingdom

gbets
Dynamex (Pty) Ltd dba G-bets
PO Box 7383
Westgate, Roodepoort, 1734, South Africa

Global Poker
VGW dba Global Poker
Level 8, 192 St Georges Tce
Perth, WA, 6000, Australia

Goalwin Poker
Goal Ventures Ltd dba Goalwin Poker
47 Oaklands Dr
Dublin, 6 Ireland

GTBets
gtbets.eu dba GTBets
support@gtbets.eu
Willemstad, Curacao

Heritage Sports
Heritage Sports
customerservice@heritagesports.com
San Jose, Costa Rica

HitBTC
HitBTC
Ave. Vitcaura 2969
Las Condes, Region Metropolitana, Chile

Iconomi
Cashila OOD dba Iconomi
Kazbek 59 ofis 10
Sofia, 1680 Bulgaria

Ignition Casino
Lynton Limited dba Ignition Casino
PO Box 2280
Kahnawake, QC J0L 1B0 Canada

Interpoker
Cryptologic Operations Ltd dba Interpoker.com
The Emporium, Level 4
Msida, MSD 1421, Malta

Intertops
Thinkquick Ltd dba Intertops
3997 Armory Bldg
Basseterre, St. Kitts (Saint Kitts and Nevis)

Interwetten
Interwetten Gaming Ltd.
The Globe Bldg, 120 The Strand, 5th Floor
Gzira, GZR1027, Malta

iPoker
Playtech (Cyprus) Limited dba iPoker
3 Anthinadorou St Dasoupolis
Strovolos, Nicosia 2025 Cyprus

Iron Poker
Universe Entertainment Services Malta Limited dba Iron Poker
Level 3, VAlletta Buildings, South St
Valletta, VLT1103, Malta

Juicy Stakes Poker
Thinkquick Ltd dba Juicy Stakes Poker
3997 Armory Bldg
Basseterre, St. Kitts (Saint Kitts and Nevis)

Just Dice
Just-Dice.com
PO Box 0823-03411
Panama City, Panama

KuCoin
KuCoin Co., Limited
support@kucoin.com
Hong Kong, Hong Kong

Ladbrokes
Ladbrokes International plc
Suites 6-8, 5th Floor, Europort
Gibraltar, Gibraltar

Liqui
Liqui.io
support@liqui.freshdesk.com
Kiev, Ukraine

Livecoin
Red Velvet Investments Ltd dba Livecoin
help@livecoin.net
Belize City, Belize

Lowvig
Lowvig.ag
support@lowvig.ag
San Jose, Costa Rica

Lucky Ace Poker
Cassava Enterprises dba Lucky Ace Poker
Ste 601-701, Europort Ave
Gibraltar, Gibraltar

Luxbet
Luxbet Europe Limited
Clinch’s House, Lord St
Douglas, IM99 1RZ, Isle of Man

MarathonBet
Panbet dba MarathonBet.com
141 Davigdor Rd
Hove, BN3 1RE, United Kingdom

Matchbook
Triplebet Limited dba Matchbook
Inchalla, Le Val
Alderney, GY9 3UL, Channel Islands (Guernsey)

Merge Gaming
Merge Gaming Ltd
Broombridge Business Centre, Broombridge Station, 288 Bannow Rd
Dublin, 7, Ireland

MyBookie.ag
Duranbah Limited N.V. dba MyBookie.ag
aa2cf938d53efaf68bbcba3ade531aad-4746197@contact.gandi.net
San Jose, Costa Rica

Natural8.com
Forrest Vale Limited dba Natural8.com
Wickhams Cay II, Vistra Corporate Services Centre
Road Town, Tortola, VG1110, British Virgin Islands

NetBet
Cosmo Gaming Company Limited dba NetBet
209, Marina Street
Pieta, PTA9041, Malta

Neteller
Optimal Payments Ltd dba Neteller
2 Mount Pleasant
Cambridge, CB3 0RN, United Kingdom

Nitrogen Sports
Nitrogen Sports
support@nitrogensports.eu
San Jose, Costa Rica

NoiQ
iGame Malta Ltd dba NoiQ
6, The Firs, George Borg Olivier St
Sliema, SLM 1801, Malta

Nordic Bet
Double Zero Casino Ltd dba NordicBet
Ta’Xbiex Seafront
Ta’Xbiex, TBX1027, Malta

Noxwin
EveryMatrix Ltd edba Noxwin.com
Ste 10, level 4, Portomaso Business Tower, Vjal Portomaso
St. Julians, STJ4011, Malta

Oanda Europe
Oanda Europe
25 Watling St
London, EC4M 9BR, United Kingdom

Oddsmaker Casino
OddsMaker.ag
support@oddsmaker.ag
Curacao, Curacao (Netherlands Antilles)

Opoker
Headlong Limited dba Opoker
85, St John St
Valletta, VLT1165, Malta

Pacific Poker
Cassava Enterprises (Gibraltar) Limited dba Pacific Poker
Suite 601-701, Europort Ave
Gibraltar, Gibraltar

PaddyPoker
Paddy Power Holdings Limited
1st Floor, 12-14 Ridgeway St
Douglas, IM1 1EN, Isle of Man

Paradise Poker
Sprtingbet dba Paradise Poker
85 St. John St
Valletta, VLT1165 Malta

Party Poker
Party Gaming dba Party Poker
Suite 711, Block 7, Europort
Gibraltar, Gibraltar

Pinnacle Sports
Pinnacle Sports
Pater Euwensweg 31 (2nd Floor)
Willemstad, Netherlands Antilles (Curacao)

PKR Poker
PKR Technolgies Ltd
The Forum, 4th Flr; 74-80 Camden St
London NW12 0EG United Kingdom

Planet365 Poker
Gantor International Limited
109 Triq Sir William Reid
Gzira, GZR1033, Malta

Players Only
Gaming Ventures Ltd. dba Players Only
60 Nevis St
St. John’s, Antigua (Antigua and Barbuda)

Poker4u
Olincorp Limited dba poker4u
7, Florints St, Greg Tower, 6th Flr
Nicosia, 1065, Cyprus

Poker770
Mandarin Gaming NV dba Poker770
PO Box 4920
Curacao, Netherlands Antilles (Curacao)

Poker848
Cassava Enterprises (Gibraltar) Ltd. dba Poker848
Ste 601-701, Europort Ave
Gibraltar, Gibraltar

PokerBoss
pokerboss.online
pokerboss.online@domainsbyproxy.com
San Jose, Costa Rica

Poker Heaven
In Touch Poker Limited dba Poker Heaven
Vincenti Buildings, 28/19 Strait St, Ste 623
Valletta, VLT1432, Malta

Pokerhost
Equity Marketing Management dba Pokerhost
Emancipatie Blvd 31
Curacao, Netherlands Antilles (Curacao)

PokerKing
King Enterprises N.V. dba PokerKing
Plaza P.L. Brion, Unit 4
Willemstad, Curacao

PokerLoco
Pokerloco Malta Limited
Pendergardens 1371
St Julians, STJ902, Malta

Pokermambo
Goal Gaming Ltd dba Pokermambo
Ste 3, 64/1, Agiton Bldgs, St. Anthony St
San Gwann, SGN1347, Malta

PokerMania
Pokermania.online
support@pokermania.online
San Jose, Costa Rica

Pokermaster.com
Pokermaster.com
PO Box 343
Box Hill, VIC 3128, Australia

PokerStars
Rational Entertainment Enterprises Limited dba PokerStars
Douglas Bay Complex, King Edward Rd
Onchan, IM3 1DZ Isle of Man

PokerStars.eu
Rational Gaming Europe Ltd dba PokerStars.eu
Villa Seminia, 8, Sir Temi Zammit Ave
Ta’Xbiex, XBX1011, Malta

PokerStars.fr
REEL Malta dba PokerStars.fr
Villa Seminia, 8, Sir Temi Zammit Ave
Ta’Xbiex, XBX1011, Malta

PPPoker
AceKing Tech Limited
c/o Capital Corporate Service Anguilla Limited; Babrow Bldg
The Valley, Anguilla

PredictIt
PredictIt Europe Limited
6 Agar St
London, WC2N 4HN, United Kingdom

Red Kings
RK Operation dba Red Kings
PO Box 3321
Tortola, British Virgin Islands

RedStar Poker
RSP Entertainment N.V. dba RedStar Poker
Van Engelenweg 23
Willemstad, Curacao (Netherlands Antilles)

Riva Poker
Mandarin Gaming NV dba Riva Poker
PO Box 4920
Curacao, Netherlands Antilles (Curacao)

Skrill (formerly Moneybookers)
Skrill Limited
Floor 27, 25 Canada Square
London, E14 5LQ, United Kingdom

SKybook Sportsbook and Casino
Skybook Sportsbook and Casino
support@skybook.ag
San Jose, Costa Rica

slots.lv
Morris Mohawk Gaming Company dba slots.lv
Mohawk Territory, Kahnawake Reserve
Kahnawake, QC Canada

Smarkets
Smarkets (Malta) Limited
Level 7, Ir-Rampa ta’San Giljan St
St. Julians, STJ1062, Malta

sportbet.com
5Dimes Casino and Sportsbook dba sportbet.com
Edificio Equus
San Jose, Costa Rica

Sportsbook
Jazette Enterprises Ltd dba sportsbook.ag
60 Nevis St
St. Johns, Antigua (Antigua & Barbuda)

Sports Interaction
S.I.A. Ltd.
2006 Old Malone Rd, PO Box 1539
Kahnawake, QC, J0L 1B0, Canada

Stan James
Stan James plc
The Square, Marina Bay
Gibraltar, Gibraltar

Suited Ace
International Gaming Cooperation Limited dba SuitedAce
First Floor, Millennium House, Victoria Rd
Douglas, IM2 4RW, Isle of Man

swcpoker
OrangeWebsite.com dba swcpoker (aka Seals With Clubs, swcpoker.eu)
Kapparstigur 7
Reykjavik, Iceland

The Greek
The Greek Sportsbook
#1 Mangrove Way, M.B.F.Z.,
Freeport, Montego Bay, Jamaica

Tiger Gaming
Action Commerce Limited dba Tiger Gaming
Vredenberg
Curacao, Curacao (Netherlands Antilles)

Titan Poker
Imperial EClub Limited dba Titan Poker
PO Box 1327, Makati Post Office, Gil Puyat Ave
Makati City, Philippines

TrransferWise
TransferWise
6th Flr, TEA Bldg, 56 Shoreditch High St
London, E1 6JJ, United Kingdom

Triobet
Double Zero Casino Limited dba Triobet
G.B. Bldg, Watar St
Ta’Xbiex, XBX 1301, Malta

True Poker
BMX Entertainment dba True Poker
71C Georgio A, Office 3, Germasogeia
Limassol, 4047, Cyprus

Unibet
Unibet International Ltd
Fawwara Bldgs, Msida Rd
Gzira, GZR1405, Malta

Vietbet
5Dimes Casino and Sportsbook dba Eurobet
Edificio Equus
San Jose, Costa Rica

WagerWeb
WagerWeb.ag
support@wagerweb.ag
San Jose, Costa Rica

William Hill
WHG (International) Ltd
6/1 Waterport Place
Gibraltar, Gibraltar

Win Cake Poker
Cake Entertainment N.V.
Dr. M.J. Hugenholtzweg Z/N UTS Gebouw
Willemstad, Netherlands Antilles (Curacao)

Winamax.fr
Winamax
CS 50746, CEDEX 07
Paris, 75345, France

Winner Poker
Redfinger Trading Ltd dba Winner Poker
3 Anthinodorou St
Nicosia, 2025, Cyprus

WPTPoker.com
Peerless Media Limited dba WPTPoker
Ste 6, Atlantic Suites, Europort Ave
Gibraltar, Gibraltar

Yobit
Yobit.net
support@yobit.net
Moscow, Russia

Youwager.eu
Dowson Universal Technologies Limited dba Youwager.eu
20 Stuart Ct
Consett, County Durham, DH8 5GA, United Kingdom

(hide)

If anyone has additions or corrections to the list feel free to email them to me.

Tags:FBAR
Posted in Cryptocurrencies, FINCEN, Gambling | Comments Closed

GOP Tax Proposal Targets Professional Gamblers’ Losing Years

Thursday, November 2nd, 2017

The Joint Committee on Taxation released its new tax proposal, H.R. 1, today. Buried within it is Section 1305:

SEC. 1305. LIMITATION ON WAGERING LOSSES.
(a) IN GENERAL.—Section 165(d) is amended by adding at the end the following: ‘‘For purposes of the preceding sentence, the term ‘losses from wagering transactions’ includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering trans action.’’.

So what does this mean? The Joint Committee on Taxation (JCT) sent out an analysis:

Sec. 1305. Limitation on wagering losses.

Current law: Under current law, a taxpayer may claim an itemized deduction for losses from gambling, but only to the extent of gambling winnings. However, taxpayers may claim other deductions connected to gambling that are deductible regardless of gambling winnings.

Provision: Under the provision, all deductions for expenses incurred in carrying out wagering transactions (not just gambling losses) would be limited to the extent of wagering winnings. The provision would be effective for tax years beginning after 2017.

JCT estimate: According to JCT, the provision would increase revenues by $0.1 billion over 2018-2027.

The JCT analysis is wrong about the current law. Only professional gamblers can take business expenses beyond their gambling winnings to create an overall loss. This is the result of Mayo v Commissioner; Section 1305 would overrule the Mayo decision.

I will have more on this proposal, most likely over the weekend. There’s quite a bit for me to digest. For now, let me state that my first reading of the measure did not leave me feeling good about it.

Tags:TaxReform2017
Posted in Gambling, Legislation | Comments Closed

Israel Tax Authority Targets Poker Professionals

Wednesday, November 1st, 2017

Some unknown bureaucrat working at the Israel Tax Authority was likely reading something about poker or perhaps watching the World Series of Poker on television when he asked himself, “I wonder if Israeli poker players are paying their income taxes?” He likely looked at poker websites such as Hendon Mob and did a search on ‘Israel.’ He discovered that there were Israeli poker professionals and even an Israel Poker Tour (held in Cyprus).

As an article in Globes notes, the Tax Authority wants its share. The current disputes include:

– Taxing poker as a business (at a rate of up to 50%) rather than as gambling (at 35%);
– Allowing business expenses, such as travel and tournament fees; and
– Allowing poker losses and ‘staking losses’ (where a player wins money but must give it to others) as an offset to income.

It appears that the Tax Authority has won that poker income will be taxed as a business, but has not allowed all business expenses and what I’m calling staking losses. Disputes are finding their way into Israel’s court system; it will likely be months to years before there’s a resolution of the issues.

That said, one thing is clear: With the Internet and publicity, it’s getting harder and harder to hide the fact that you’ve earned income. Sharon Fishman, the manager of criminal taxation department of Doron, Tikotzky, Kantor Gutman and Amit Gross law firm, is quoted in the Globes article:

An administrative decision was recently taken there to zero in on this segment of professional poker players. This is due mainly the accessibility of the information about them on the Internet, because there are now international websites that report who won international tournaments, who plays on the Internet, and who is traveling to overseas tournaments. They publish the names of the winners, where they come from, and how much money they earned, so the tax authorities suddenly have abundant evidence, and you can’t tell them that you weren’t there and didn’t win.

Posted in Gambling, International | Comments Closed

Can a Tunnel Bridge Agent be a Professional Gambler, Too?

Monday, October 2nd, 2017

The Tax Court looked at whether someone who worked full time as a Tunnel Bridge Agent could also be a professional gambler. There is a lot in the decision, including some things that I believe the Court gets wrong.

The opinion first describes the differences between being a professional gambler and an amateur gambler. If you are unaware of the differences in the tax treatment, this opinion is must-reading. Unfortunately, the opinion gets the definition of a professional gambler only half-right. “To be a professional gambler, the taxpayer must engage in gambling for profit,” is what the opinion states (citing Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987)). But the courts have held that you need to be gambling for your livelihood, a stricter standard. There are numerous amateur gamblers who do so for a profit (I am one of those), but I’m an amateur gambler. My livelihood comes from my tax practice, but I’m skilled (or lucky) enough to make money from poker.

In any case, today’s taxpayer, Mr. B, doesn’t even pass this test. His first problem is where he gambled and his recordkepping or, should I say, his lack of recordskeeping.

Boneparte gambled at horse racetracks and in casinos. At the casinos his preferred game was baccarat, but he also played other table games as well as slots. Sometimes he gambled alone, and sometimes he gambled with a friend. He gambled primarily in Atlantic City. He did not keep a contemporaneous written log of winnings and wagers.

If you’re in business, you are supposed to keep records. The IRS rules on gambling—and these date back to the 1970s—mandate a contemporaneous, written log. (Remember, those rules were written well before smartphones or any cellphone. Today, computer records would most likely be accepted.) But if you have no records, you’re going to have trouble substantiating that you’re a professional gambler. Yes, Mr. B had casino win-loss statements but (a) these are not guaranteed to be accurate (a point the Court missed in its opinion), and (b) professionals want to know what they’re succeeding in and failing in; the only way to do that is to keep your own records.

As an aside, it’s hard to be a professional gambler when you are playing games of pure chance with a house (casino) advantage. That’s why most professional gamblers play poker (where you’re playing against other players); a lesser number of professional gamblers partake in sports betting and “advantage” video poker (where there’s a small player advantage with perfect play). But I digress…

The Court then looked at the nine-factor test of whether an activity is engaged in for profit.

(1) [T]he manner in which the taxpayer carries on the activity; (2) the expertise of the taxpayer or his advisers; (3) the time and effort expended by the taxpayer in carrying on the activity; (4) the expectation that assets used in the activity may appreciate in value; (5) the success of the taxpayer in carrying on other similar or dissimilar activities; (6) the taxpayer’s history of income or losses with respect to the activity; (7) the amount of occasional profits, if any, which are earned; (8) the financial status of the taxpayer; and (9) elements of personal pleasure or recreation.

Mr. B. didn’t lose on all of the factors: Factor #4 (expectation of asset appreciation) was held not to apply. With the Court ruling that Mr. B. Isn’t a professional gambler, most of the rest of the opinion goes into calculation issues of his return and penalty calculations.

However, I want to point out an error the IRS made that I’ve seen in my practice. If a casino win-loss statement shows a net loss $14,887, and we know that the gambler had gross wins (before losses) of $18,000, his gross losses must be $32,887. That’s simple math. I once had to explain to an IRS Revenue Agent how this works; it took about a half-hour for him to grasp the concept. In this case, the IRS was holding this same idea that Mr. B’s gross loss was his total loss. The Court, though, understood basic math:

As explained above, two propositions are true: (1) the gains from wagering transactions for which there was gain total $18,000, and (2) the gains from wagering transactions for which there was a gain minus the losses from wagering transactions for which there was a loss equal -$14,887. It mathematically follows from these two propositions that the losses from wagering transactions for which there is a loss equal -$32,887 (i.e., $18,000 ! $32,887 = -$14,887). [Mr. B] is entitled to a section 165(d) deduction equal to this amount to the extent of gains from wagering transactions. This gain is $18,000. Therefore his section 165(d) deduction is $18,000.

Mr. B’s returns were self-prepared. He included his gambling on both a Schedule C and as Other Income. In almost all cases, you’re either a professional gambler or an amateur gambler (not both). The IRS assessed both the late filing penalty (Mr. B’s return was postmarked after the April deadline) and the accuracy-related penalty; both were sustained.

Mr. B gives a good example of someone who wanted to be a professional gambler because it would help him save on his taxes. Unfortunately for him, he neither treated his business professionally nor was he able to show the Tax Court that he was a professional gambler.

Posted in Gambling, Tax Court | Comments Closed

It’s One 1099 Per Person, Or the Most Stupid and Hilarious Thing I’ve Seen in Some Time

Friday, September 29th, 2017

One of my clients, Barri Brown (all names in this post are fictitious), was missing a 1099 issued by one of the two large Daily Fantasy Sports (DFS) companies. It didn’t show on her Wage & Income Transcript, so she called their accounting department and requested a copy. A few days later they emailed it to her. She forwarded it on to me and I entered it into her return.

And then I took a look at the pdf and saw that it was 18 pages long. I wondered what kind of attachments this company would send on a 1099? Perhaps a breakout of state tax issues (although that didn’t apply to my client). Or perhaps some internal accounting records detailing Ms. Brown’s profits and losses.

How about the 1099s for everyone this company serviced with the last name of Brown? The second page is that of Brett Brown, the third page is Daniel Brown, etc. At least only the last four digits of the social security numbers were shown (but both my client and I know the exact amount of Brett Brown’s DFS income from this site in 2016).

In one way, this is hilarious. Apparently it was easier for that clerk to email the 1099s for all the Browns to my client than to just send the specific 1099. (I have to wonder about how they create their 1099s, but that’s a question for another day.)

In another way, it’s stupid. Hasn’t this company heard of privacy concerns and laws? My client has every right to know her income, but absolutely no right to know Brett Brown’s income (unless Mr. Brown elects to tell one of us).

But my client asked a very good question. “That is HILARIOUS and absurd and maybe illegal?” I’m not an attorney, so I can’t state with certainty whether this was a violation of the law. The reality is that this was almost certainly a stupid error, and there wasn’t the intent to do something illegal.

(Tax professionals fall under the provisions of the Federal Trade Commission Act. If a tax professional were to deliberately do this, it definitely could be a violation of the FTC Act.)

Unfortunately, the data breach at Equifax and this act of stupidity reinforce my belief that businesses need reminders to treat data security very seriously. My client used an Employer Identification Number (EIN) with the DFS company; I strongly recommend that sole proprietors (like my client) do that whenever possible. A stolen EIN (for a sole proprietor) can’t be used to file a personal tax return.

Let me give a helpful hint to those issuing 1099s and sending them out: It’s one to a customer. Barri Brown doesn’t need Steven Brown’s 1099. Luckily for this company, my client is able to laugh this off (as am I). The problem is that if this happened to Ms. Brown, it likely happened to Mr. Nelson and others.

Tags:1099s, DFS
Posted in Gambling, Information Returns | 1 Comment »

The 2017 Real Winners at the World Series of Poker (London Calling, Again)

Sunday, July 23rd, 2017

The main event of the World Series of Poker has completed: 7,221 ponied up $10,000 to enter. The final nine players began competing on Thursday; last night the winner was crowned. How much of his winnings does he get to keep? And why are four of the nine very, very happy that their court system considers poker to be a complete game of chance?

One note: I do need to point out that many of the players in the tournament were “backed.” Poker tournaments have a high variance (luck factor). Thus, many tournament players sell portions of their action to investors to lower their risk. It is quite likely that most (if not all) of the winners were backed and will, in the end, only enjoy a portion of their winnings. I ignore backing in this analysis. Now, on to the winners.

Congratulations to Scott Blumstein of Morristown, New Jersey for winning poker’s biggest prize of $8,150,000. Mr. Blumstein came into the final table with the overwhelming chip lead and never relinquished it. Mr. Blumstein ended a long head-up battle when a deuce was the last community card and his Ace-deuce beat his opponent’s Ace-eight. A professional gambler, he’ll lose 47.11% of his winnings to federal and New Jersey tax ($3,839,429). Even though he had the largest winnings, he does not face the top tax burden among the nine (his is the second highest).

Dan Ott of Altoona, Pennsylvania (near Pittsburgh) finished in second place. Mr. Ott started the final table in fifth place, and worked his way into second place and a prize (before taxes of) $4,700,000. His state tax burden is the lowest among Americans (Pennsylvania’s state income tax is a flat 3.07%), but as a professional gambler he must also pay Altoona’s Earned Income Tax of 1.60%. Overall, Mr. Ott will pay an estimated $2,099,806 in tax (44.68%) to obtain after-tax winnings of $2,600,194. Indeed, Mr. Ott almost falls to fourth place based on after-tax results.

Finishing third and winning $3,500,000 was Benjamin Pollak. Mr. Pollak, originally from Paris, France, moved to London. Why would a Frenchman move from beautiful Paris to London? In a word, taxes. As a European Union resident, he could move to any other E.U. country and fall under their tax system. The US-United Kingdom Tax Treaty exempts gambling winnings from withholding. Additionally, poker winnings are completely tax-free in the United Kingdom (a court case a few years ago cemented this for now), so Mr. Pollak gets to enjoy all of his $3,500,000 of winnings.

But let’s assume that Mr. Pollak had remained living in Paris. On the positive side, the US-France Tax Treaty exempts gambling winnings from withholding. On the negative side, France is anything but a low-tax country. I cannot be certain of the taxes for 2017; the actual tax rates are voted in towards year-end so I’ve used the 2016 tax rates for my analysis. However, I doubt 2017 rates will vary significantly from last year. At an income of €152,260, the marginal tax rate is 45% (the highest in France). There’s also a surtax of 3% at an income of €250,000 or more (and this rises to 4% at €500,000 or more). Mr. Pollak would owe about 48% of his winnings in tax. No wonder London was calling for him!

You may be wondering why American professional poker players don’t hop a 747 and move to London. First, Americans owe tax on their worldwide income, so an American residing in London would still owe tax on his World Series of Poker winnings. Second, while Europeans currently can relocate to the United Kingdom per the European Union, Americans cannot.

(One thing that is very unclear today is how long Frenchmen will be able to lower their tax by moving to England. With the passage of Brexit last year sometime in the near future the United Kingdom won’t be part of the European Union; the tax benefits of residing in the United Kingdom for French poker players will vanish. But I digress….)

The individual who had the most fun at the final table was clearly John Hesp of Bridlington, England. Mr. Hesp, a grandfather of seven and the oldest competitor (he’s 64), is decidedly not a professional poker player. Indeed, his prior tournament experience was playing in £10 (about $13) tournaments at his local casino in Hull; here, he was competing in a $10,000 (about £7,695) tournament! Mr. Hesp was clearly having the time of his life; the $2,600,000 he won will make this trip to Las Vegas a great memory. Even better, he gets to keep all the money.

Antonie Saout of Morlaix, France finished fifth and won $2,000,000 before taxes. Mr. Saout also lives in London (in fact, he shares an apartment with Mr. Pollak) so he, too, benefits from the United Kingdom’s great treatment of poker players. His after-tax winnings are his pre-tax winnings of $2,000,000. Had Mr. Saout remained a resident of France he would have owed about 48% of his winnings to the France Tax Agency. This was the second time Mr. Saout made the final table of the WSOP main event: He finished in third place in 2009.

Bryan Piccioli of San Diego ended up in sixth place and won $1,675,000 before taxes. Mr. Piccioli is a professional poker player and faces the highest percentage tax burden among the final nine: an estimated $489,328 to federal tax and $201,695 to California income tax (a total tax burden of $791,023, or 47.23%). Based on after-tax winnings, Mr. Piccioli finished in eighth place.

Damian Salas of Buenos Aires, Argentina finished seventh. Mr. Salas is a former attorney who is now a professional poker player. He earned $1,425,000 for his efforts. Argentinians love gambling and gambling winnings are not subject to income tax in Argentina. (Casinos in Argentina do pay significant taxes.) However, the United States and Argentina do not have a tax treaty; thus, Mr. Salas will lose 30% of his winnings to the Internal Revenue Service.

In eighth place was Jack Sinclair of London; he received $1,200,000 in winnings. Like the others residing in the United Kingdom he gets to keep all of his winnings. In one sense Mr. Sinclair was the biggest winner despite finishing eighth. Based on after-tax winnings of $1,200,000 Mr. Sinclair finished sixth. It’s always nice when your after-tax income is the same as your pre-tax income.

Ben Lamb, a professional poker player from here in Las Vegas, finished in ninth place. This was Mr. Lamb’s second time finishing in the top nine of the main event (he finished third in 2011). Mr. Lamb loses an estimated $408,483 (40.85%) to federal income tax. As a resident of the Silver State Mr. Lamb doesn’t have to worry about state income tax on his winnings.

Here’s a table summarizing the tax bite:

Amount won at Final Table	$26,250,000
Tax to IRS	$6,390,860
Tax to New Jersey Division of Taxation	$754,196
Tax to Franchise Tax Board (California)	$201,695
Tax To Pennsylvania Department of Revenue	$144,290
Tax to Altoona Earned Income Tax	$75,200
Total Tax	$7,566,241

That’s a total tax bite of 28.82%. That’s fairly low for the main event because four of the winners face no taxation at all.

Here’s a second table with the winners sorted by their estimated take-home winnings:

Winner	Before-Tax Prize	After-Tax Prize
1. Scott Blumstein	$8,150,000	$4,310,571
3. Benjamin Pollak	$3,500,000	$3,500,000
2. Dan Ott	$4,700,000	$2,600,194
4. John Hesp	$2,600,000	$2,600,000
5. Antoine Saout	$2,000,000	$2,000,000
8. Jack Sinclair	$1,200,000	$1,200,000
7. Damian Salas	$1,425,000	$997,500
6. Bryan Piccioli	$1,675,000	$791,023
9. Ben Lamb	$1,000,000	$597,517
Totals	$26,250,000	$18,683,759

As noted previously, Bryan Piccioli finished in sixth place but based on after-tax winnings he ends up in eighth place. While taxes may be the price of civilization, the price in the United States is high.

This was an off-year for the IRS. The IRS’s total of $6,390,860 didn’t match the first place prize of $8,150,000. Still, it did exceed the first place winner’s after-tax prize of $4,310,571. That’s because we all know that the house (the IRS) always wins.

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Taxable Talk

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